August 18, 2020
Dear Friends and Family,
This is Segment 4 of the China Series. It focuses on current conflicts that exist between China and the U.S. Specifically:
Additionally, it contains a perspective by two Wall Street Journal reporters in their book Superpower Showdown on how the two countries are heading into Cold War II [Cold War I being the 40 year plus standoff between the U.S. and Russia].
My Takeaways:
I have several takeaways from this segment, but I am electing to highlight just two: Fifth Generation Communications (5G) and China’s corporate social credit system.
Our current telecommunications system is Fourth Generation (4G) which was led by Western telecom companies, namely AT&T and Verizon. 5G technology is not an incremental update of 4G technology, in fact, the excerpts likened the difference to a typewriter versus a computer. 5G is critical technology to achieving technical superiority and economic competitiveness in the world. 5G technology is being led by a Chinese company – Huawei, who is much further along in developing and utilizing the technology than any Western telecom company. In fact, the U.S. does not even have a player in the development race. Why? Because the Chinese Communist Party (CCP) gave a $75 billion subsidy to Huawei, who used it to underbid competitors by as much as 30% for several years. That resulted in the demise of Alcatel-Lucent and Motorola in the U.S. and put AT&T and Verizon in so much debt that they didn’t have the funds to pursue the research and development of 5G technology. So, we have to hope European companies Samsung, Ericson, or Nokia can effectively compete with Huawai. We could utilize Huawei equipment but doing so presents substantial risk. Huawei has been putting back doors in their mobile devices for a decade which gives them access to all users wireless data which people believe is then passed on to the CCP. The risk is significant enough that President Trump has stated that we as a country will cease sharing any intelligence data with a country who utilizes Huawei equipment. Additionally, if we utilize 5G technology for Internet services via Huawei it may be subject to Chinese censorship – net giving us some inaccurate information. As the excerpts reflect, we have to find a way to utilize the technology via equipment other than that of a Chinese company.
The two Wall Street Journal reporters who authored the excerpts in the “Superpower Showdown” portion of this segment make them the fifth and sixth authors of the series who have warned us about Chinese aggression and the very real probability that we are entering or are in a Cold War.
The other takeaway I want to highlight is China’s new corporate social credit system. In segment 2, China’s e-tyranny system was featured – a system which monitors every person’s movement and action in China via cameras, cell phones, GPS monitoring, and listening devices all feeding big data computing systems which is sorted by artificial intelligence, so the CCP can grade each person on their loyalty and adherence to CCP standards. The corporate social credit system appears to be a similar system but focused on corporations versus individuals. It will be interesting to see how our large multi-national companies react to that.
Next:
Next week’s segment is the last of the China series and is titled “Meeting the Chinese Threat.” It provides a bit more on some of the China domination initiatives and then some perspective on what the U.S. needs to address the threat.
Happy Learning,
Harley
Dear Friends and Family,
This is Segment 4 of the China Series. It focuses on current conflicts that exist between China and the U.S. Specifically:
- Theft of Intellectual Property
- Fifth Generation Communications (5G)
- North Korea
- Taiwan
- South China Sea
- U.S. – China Trade Negotiations
Additionally, it contains a perspective by two Wall Street Journal reporters in their book Superpower Showdown on how the two countries are heading into Cold War II [Cold War I being the 40 year plus standoff between the U.S. and Russia].
My Takeaways:
I have several takeaways from this segment, but I am electing to highlight just two: Fifth Generation Communications (5G) and China’s corporate social credit system.
Our current telecommunications system is Fourth Generation (4G) which was led by Western telecom companies, namely AT&T and Verizon. 5G technology is not an incremental update of 4G technology, in fact, the excerpts likened the difference to a typewriter versus a computer. 5G is critical technology to achieving technical superiority and economic competitiveness in the world. 5G technology is being led by a Chinese company – Huawei, who is much further along in developing and utilizing the technology than any Western telecom company. In fact, the U.S. does not even have a player in the development race. Why? Because the Chinese Communist Party (CCP) gave a $75 billion subsidy to Huawei, who used it to underbid competitors by as much as 30% for several years. That resulted in the demise of Alcatel-Lucent and Motorola in the U.S. and put AT&T and Verizon in so much debt that they didn’t have the funds to pursue the research and development of 5G technology. So, we have to hope European companies Samsung, Ericson, or Nokia can effectively compete with Huawai. We could utilize Huawei equipment but doing so presents substantial risk. Huawei has been putting back doors in their mobile devices for a decade which gives them access to all users wireless data which people believe is then passed on to the CCP. The risk is significant enough that President Trump has stated that we as a country will cease sharing any intelligence data with a country who utilizes Huawei equipment. Additionally, if we utilize 5G technology for Internet services via Huawei it may be subject to Chinese censorship – net giving us some inaccurate information. As the excerpts reflect, we have to find a way to utilize the technology via equipment other than that of a Chinese company.
The two Wall Street Journal reporters who authored the excerpts in the “Superpower Showdown” portion of this segment make them the fifth and sixth authors of the series who have warned us about Chinese aggression and the very real probability that we are entering or are in a Cold War.
The other takeaway I want to highlight is China’s new corporate social credit system. In segment 2, China’s e-tyranny system was featured – a system which monitors every person’s movement and action in China via cameras, cell phones, GPS monitoring, and listening devices all feeding big data computing systems which is sorted by artificial intelligence, so the CCP can grade each person on their loyalty and adherence to CCP standards. The corporate social credit system appears to be a similar system but focused on corporations versus individuals. It will be interesting to see how our large multi-national companies react to that.
Next:
Next week’s segment is the last of the China series and is titled “Meeting the Chinese Threat.” It provides a bit more on some of the China domination initiatives and then some perspective on what the U.S. needs to address the threat.
Happy Learning,
Harley
CHINA SERIES 2020 – SEGMENT 4
CURRENT U.S. – CHINA CONFLICT -- EXCERPTS
INTRODUCTION: Is a rising China good for America and the world? Clearly is has not been good for America. The trillions of dollars of wealth, technology, and intellectual property that have been transferred across the Pacific – much of it stolen has been a disaster for American industry and trade – has sent millions of workers to the unemployment lines, and has caused the wages of the middle class to stagnate. Obama’s strategic assessment of China was based on the assessment, subscribed to by every president from Nixon on, that China’s opening to the West, combined with its increasing prosperity, would painlessly result in its peaceful evolution away from one-party dictatorship towards a more open political system. In the end, if we would all just be patient, China would become a pluralistic democracy not all that much different from our own. This pleasant fantasy about China’s future was dead wrong – something that should have been obvious to anyone as early as June 4, 1989.
Source: Bully of Asia by Steven W. Mosher
TRADE and INTELLECTUAL PROPERTY (IP): President Trump and General Secretary Xi Jinping are locking horns over trade tariffs. President Trump rightly has been leveraging the power of the U.S. economy to convince Xi to stop unfairly subsidizing Chinese goods and dumping them into the U.S. and other international markets. Again and again, we have seen leaders from both countries say they are close to a deal. The Trump administration receives assurances that intellectual property protections will be included in the final trade agreement. Then, when it has been time to sign on the dotted line, we have seen the Chinese negotiators attempt to strip these protections at the last minute – presumably hoping President Trump and his team don’t notice or are too exhausted to push back. This tactic has worked with past administrations – but it has not worked with this one. President Trump has continued to stand his ground.
Greatest Theft in the History of the World: Despite assigning IP attaches to China postings, raising the issue at international summits and bilateral talks, and issuing annual reports on economic espionage and intellectual property theft, the second Bush administration turned a blind eye to China’s largescale and strategically directed theft of American ingenuity. Similarly, President Barack Obama talked tough on China while campaigning and backed off when it came time for action. Obama even refused to be effectively stern with General Secretary Xi, whose government the Justice Department directly implicated in massive hacking and espionage cases. Cyber operations from China are still targeting and exploiting U.S. government, defense industry, academic, and private computer networks.
FIFTH GENERATION COMMUNICATIONS (5G): The most immediate and pressing challenge that we face with China is the race to develop and deploy the world’s 5G communications network. We are well behind in this effort. The Chinese Communist Party (CCP) has been working toward globally domination in this technology, and the U.S. is only now waking up to the fact that we are in serious competition. We must learn how to deal with the 5G challenge both because of its inherent importance and because we are going to face many challenges like this over the next few years. 5G technology will introduce new capabilities as it increases wireless capacity and changes the way our physical and virtual environments interact. The other big reason we need to win the race to 5G dominance is to prevent the internet and communications networks of the future from being controlled by a communist totalitarian state. Imagine a world in which Chinese rules are applied to the internet, your cell phone is monitored by Beijing, your search engine is censored by Chinese authorities, and you facial identity is tracked around the world and archived in China. This world is incredibly likely – and perhaps a decade away – if we continue to be confused and disorganized in building a 5G communications system. It is not a distant problem.
There are clear steps that must be taken to bring 5G to market that will protect America’s national security, connect rural America, and ensure the U.S. leadership in this industry. The government must provide the leadership and encouragement, while the private sector must install and deploy the necessary, cutting-edge technology. If we fail to implement this all-of-government and all-of society effort to deploy 5G securely and efficiently, we are risking a totalitarian, CCP-controlled technological future. The time to act is now, and the level of urgency cannot be overstated.
Beating China: Currently, the failure of the major American telecommunication companies – and the failure of the U.S. government – leaves us with no competitive position worldwide. We keep warning countries not to use Huawei in the 5G networks, but we don’t have a replacement system to offer. Unfortunately, despite bipartisan efforts in the U.S. to convince our international allies to bar Huawei from 5G networks, we are losing this argument. In January 2020 the United Kingdom announced it would allow Huawei to access some parts of its 5G networks. Similarly, German leaders have paid lip service to the dangers of using Huawei devices in Germany’s network, but the country has so far declined to ban the company from its market. Canadian telecom company Telus Corps announced it would use components for the “backbone” of its 5G network. It is currently impossible to create a wholly American system. This is because we don’t have any companies that can build necessary network components. Instead, U.S. carriers must rely on Samsung, Ericsson, or Nokia to physically build the equipment we need.
As a first step, President Trump should direct the Department of Defense (DoD) to issue a request for proposals for innovative plans to develop a truly nationwide 5G system and respond to Huawei’s expansion. This should be a DoD initiative, because our national security is at stake if the CCP ultimately controls the next-generation Internet. We already know that the CCP uses data collection and control of information to impose its will on its own people. Handing China control of the worldwide database of information that will undergird large-scale artificial intelligence systems is a scary prospect.
Source: Trump and American Future by Newt Gingrich.
COUNTERING THE GROWING STRENGTH OF CHINA:
North Korea: Aside from supplying economic and military aid to its ally, China has another equally important role to play in this Beijing Opera of its own making: to buy time for its North Korean ally to further upgrade its weaponry. Each time North Korea conducts a nuclear test or fires off a missile, Beijing counsels the U.S. that the only way to resolve the tension of the Korean Peninsula is to exercise strategic patience, enter into negotiations, and gradually build trust. Americans should be insulted by these brazen displays of Chinese duplicity. Here we find China lecturing us on the need to “exercise restraint” and “build mutual trust” at the very same time it is quietly helping North Korea, its closest ally, to increase the inventory and accuracy of its missiles. We know the Chinese leadership believes Americans to be naïve and simple in general, but with regard to North Korea, they have been treating us as complete fools. We must make it clear that we hold China directly responsible for the behavior of its closest ally. If China refuses to distance itself from North Korea, then there is only one thing left to do. We must tell China that we will treat an attack by North Korea on the U.S. or its allies as an attack by China. Then we can sit back and count the days until China removes Mad Young Kim from power and shuts down his nuclear and missile programs.
Taiwan: For almost four decades we have engaged in the pretense that – diplomatically speaking – Taiwan doesn’t exist. In order to placate China, we abrogated our mutual security treaty with Taiwan. We established diplomatic relations with the People’s Republic of China in 1979, agreeing to virtually all of Beijing’s demands, including acknowledging that there was only “one China.” (Note: Jimmy Carter was president). While our China policy has failed, our Taiwan policy – if we can even be said to have one – has succeeded. Isolated by the international community, largely abandoned by the U.S., Taiwan has continued to thrive. Against all odds, it has evolved into a modern democratic state, one that shares our values and institutions. As such, it is an island of democratic hope in a sea of Chinese despotism. Upgrading our de facto alliance with Taiwan would strengthen our position in the Asian-Pacific, secure a vital linchpin in our defenses along the Pacific rim, and give hope to China’s dissidents. But it is a functioning, indeed flourishing democracy that poses an existential threat to the continued rule of the Chinese Communist Party.
Source: Bully of Asia by Steven W. Mosher
South China Sea: China is presently defying long-standing international norms by building militarized, artificial islands throughout the South Sea and staking claims on existing features – all in an effort to assert control over the region, weaken the U.S. position, and bully its neighbors into accepting its dominance as a regional hegemon.
Source: Trump vs. China by Newt Gingrich
SUPERPOWER SHOWDOWN: A month after the 2018 midterm elections, chief executives of 75 of the nation’s leading manufacturing technology and financial firms gathered in Washington, D.C. to hear from top Trump administration officials. The CEO’s were concerned about China. The Wall Street Journal’s, editor-at-large, Gerard Baker faced off with John Bolton, who was then the administrations’ national security advisor. Baker posed a question to the audience: “Will the U.S. and China find themselves at war sometime in the next 20 years?” That is, a real war between two nuclear-armed nations that account for 40% of the world’s gross domestic product. In the final vote tally, about one-third of the executives said the two nations were headed for war, an astounding high percentage, considering the audience. How did it come to this moment?
Surely, Donald Trump is part of the answer. As president, he had put half of what China sold to the U.S. under tariffs by the day of the CEO Conference and was threatening levies on the rest of Chinese imports. Various parts of the government were also working on sanctions of Chinese firms for espionage and other misdeeds. No president had taken measures anywhere near this extreme with a major trading partner since the 1930s. But Trump isn’t the entire answer. The trade and economic battle didn’t start with Trump and won’t end with him. Relations were souring before he took office. Chinese leaders also deserve a big share of the blame, as do U.S. business leaders, who for decades acted as Beijing’s lobbyists in Washington.
Has a new Cold War begun? After a year of pressure on Beijing, including levying tariffs on half of everything China sold to the U.S., the American trade team thought it was closing in on a deal in late April 2019 to remake relations, between the world’s two economic superpowers. U.S. tariffs hurt China more than its leader, Xi Jinping, publicly acknowledged. Chinese retaliatory tariffs were hitting their mark too, more than the U.S. leader, Donald Trump would say. The two sides were working on a 150-page agreement covering many American complaints against China: pressure on U.S. companies to transfer technology, weak intellectual property protection, closed financial services markets, currency devaluation that helped Chinese exporters, and insufficient purchases of U.S. goods and services.
But the U.S. side was naively optimistic and made several miscalculations about the power of the U.S. to force China to change. First, U.S. Trade Representative, Robert Lighthizer continued to insist that Washington wouldn’t remove any of its crippling tariffs when Beijing signed the deal, until China demonstrated that it was carrying out its pledges. For Xi Jinping, though, eliminating the tariffs was a bottom-line demand, which he had made clear at the outset of negotiations. On this, he wouldn’t bend. If he couldn’t get the tariffs lifted, a deal wasn’t worth much. Xi decided that Beijing needed to toughen its stance in negotiations.
Trump’s anger at the Chinese actions had another important consequence that Beijing didn’t foresee. For months, the U.S. and China had been at loggerheads over Huawei. The Americans suspected that the telecommunications company was a tool of the Chinese military, which could tap Huawei’s equipment and spy on the company’s customers around the world. To Beijing, Huawei was a crown jewel. If the company was put on the entity list (a group of companies whose U.S. purchases were severely limited) it could strangle the company, or at least halt its advance while it sought to build the technology itself or find other suppliers. Trump like the idea. Xi Jinping looked for ways to strike back. “This was a watershed moment in how China views the trade war,” says a senior Beijing official. “It’s crystal clear that the U.S. motive isn’t just trade. It’s both political and strategic. They want to keep China from becoming stronger.” Through a series of threats, counter threats, and miscalculations, the world’s two biggest economies were edging toward a new Cold War.
A Temporary Truce: Trump tweeted on June 18 that he and the Chinese leaders “had a very good telephone conversation and the two would have an extended meeting” at the G-20 summit scheduled for June 28 & 29 in Japan. Xi Jinping had plenty of reasons to seek a meeting. The trade war had led to some 5 million lost jobs in China’s industrial sector between July 2018 and May 2019. China needed to create 11 million new jobs in 2019 – a target announced by the central government early in the year – to ensure employment for important groups like college graduates, migrant workers, and discharged military personnel. China’s leaders had reasons to worry about a corporate exodus. Beijing faced a conundrum. On the one hand, officials wanted to encourage multinationals to remain in China and expand. On the other hand, they wanted to free China as fast as possible from reliance on foreign technology, even though that would make foreign firms feel unwelcome. Policy makers figured that China’s huge market would ensure enough foreign investment even if they made increasing demands of multinational companies. Xi Jinping focused on self-reliance.
Summary: Up to the Coronavirus Pandemic: After two years of fighting the U.S. and China had finally agreed to a truce in their trade war. The 90-page text of the agreement was released on January 15, 2020. The two sides agreed to this limited deal that paused the trade fight. The agreement contained detailed pledges by Beijing to protect U.S. intellectual property and end pressure on American firms to give up their technology – longtime U.S. goals – though it didn’t compel China to change laws to carry out the pledges. In exchange for small cuts in U.S. tariffs, China promised huge purchases of American products, through many trade experts doubt exports will meet the targets. But the deal left untouched many of America’s deepest concerns about Chinese mercantilism and technology policies. The so-called phase-one-deal is supposed to lead to other phases that will tackle tougher issues. In early 2020, it was far too soon to know how the system would work in practice as the coronavirus raced around the world.
LOOKING AHEAD: COLD WAR II
Despite the January truce, two years of trade wars are dividing the two nations apart. Attitudes of ordinary Americans toward China grew increasingly antagonistic. The percentage of Americans holding an unfavorable view of China jumped to 60% according to a spring 2019 survey by the Pew Research Center. This was the highest level since Pew started asking the question in 2005. This is matched by souring attitudes in China toward Americans.
The president deserves credit for challenging the easy assumptions about China that had guided American policy since at least the Clinton administration. The Trump administration also took seriously the threats to U.S. companies in China – ranging from competition from state-owned firms to the loss of technology through outright theft or more subtle intimidation – and acted sharply to get Beijing to back down. No less than the Western economic and political model is at stake in the competition with China. Americans and Europeans have long assumed that private enterprise coupled with democracy is the most efficient and productive form of development and would inevitably outperform any challenger. Beijing now is challenging that easy assumption, with a state-led model that features bureaucratic direction, heavy censorship, and a flood of cash.
The more powerful China’s economy becomes, the more money it can pour into its military, overseas investments, and technology that can be used for repression. Other countries inevitably look to the number one economy for direction and investment. Props again to the Trump administration for alerting the West to this challenge. That lies between the Trump team’s campaign, so far unsuccessful, to halt Huawei’s ability to dominate 5G telecommunications technology, which will under gird much of the global information network over the coming decade of two.
President Trump has unmasked and brought to the forefront how much China represents an economic, trade, human rights, and national security threat. An external enemy will help unify fractious Americans, as the Cold War against the Soviet Union did. While the Trump administration has been effective at recognizing the Chinese challenge, it’s been woeful at conceiving, planning, and executing a strategy to deal with Beijing’s further rise.
The Chinese government was also putting in place and refining a new system of tracking company behavior, call the corporate social credit system, which deepened state control. Under the program, Chinese government agencies rate companies on about 300 different requirements, including tax compliance, environmental protections, product quality, data transfers, prices, and licenses. Foreign firms fear that the system will be another way Beijing can discriminate against them, while claiming that is simple administering objective criteria.
At the heart of the U.S. – China war is the fear that China will eclipse the U.S. technologically on its way to economic and military superiority. The U.S. leads in nearly every technology named in China’s “Made in China 2020” report. The Trump administration hasn’t coupled its trade war with a domestic program to keep the U.S. ahead.
Source: Superpower Showdown by Bob Davis and Lingling Wei of the Wall Street Journal.
The unabbreviated version of the above can be found in the pdf document below.
CURRENT U.S. – CHINA CONFLICT -- EXCERPTS
INTRODUCTION: Is a rising China good for America and the world? Clearly is has not been good for America. The trillions of dollars of wealth, technology, and intellectual property that have been transferred across the Pacific – much of it stolen has been a disaster for American industry and trade – has sent millions of workers to the unemployment lines, and has caused the wages of the middle class to stagnate. Obama’s strategic assessment of China was based on the assessment, subscribed to by every president from Nixon on, that China’s opening to the West, combined with its increasing prosperity, would painlessly result in its peaceful evolution away from one-party dictatorship towards a more open political system. In the end, if we would all just be patient, China would become a pluralistic democracy not all that much different from our own. This pleasant fantasy about China’s future was dead wrong – something that should have been obvious to anyone as early as June 4, 1989.
Source: Bully of Asia by Steven W. Mosher
TRADE and INTELLECTUAL PROPERTY (IP): President Trump and General Secretary Xi Jinping are locking horns over trade tariffs. President Trump rightly has been leveraging the power of the U.S. economy to convince Xi to stop unfairly subsidizing Chinese goods and dumping them into the U.S. and other international markets. Again and again, we have seen leaders from both countries say they are close to a deal. The Trump administration receives assurances that intellectual property protections will be included in the final trade agreement. Then, when it has been time to sign on the dotted line, we have seen the Chinese negotiators attempt to strip these protections at the last minute – presumably hoping President Trump and his team don’t notice or are too exhausted to push back. This tactic has worked with past administrations – but it has not worked with this one. President Trump has continued to stand his ground.
Greatest Theft in the History of the World: Despite assigning IP attaches to China postings, raising the issue at international summits and bilateral talks, and issuing annual reports on economic espionage and intellectual property theft, the second Bush administration turned a blind eye to China’s largescale and strategically directed theft of American ingenuity. Similarly, President Barack Obama talked tough on China while campaigning and backed off when it came time for action. Obama even refused to be effectively stern with General Secretary Xi, whose government the Justice Department directly implicated in massive hacking and espionage cases. Cyber operations from China are still targeting and exploiting U.S. government, defense industry, academic, and private computer networks.
FIFTH GENERATION COMMUNICATIONS (5G): The most immediate and pressing challenge that we face with China is the race to develop and deploy the world’s 5G communications network. We are well behind in this effort. The Chinese Communist Party (CCP) has been working toward globally domination in this technology, and the U.S. is only now waking up to the fact that we are in serious competition. We must learn how to deal with the 5G challenge both because of its inherent importance and because we are going to face many challenges like this over the next few years. 5G technology will introduce new capabilities as it increases wireless capacity and changes the way our physical and virtual environments interact. The other big reason we need to win the race to 5G dominance is to prevent the internet and communications networks of the future from being controlled by a communist totalitarian state. Imagine a world in which Chinese rules are applied to the internet, your cell phone is monitored by Beijing, your search engine is censored by Chinese authorities, and you facial identity is tracked around the world and archived in China. This world is incredibly likely – and perhaps a decade away – if we continue to be confused and disorganized in building a 5G communications system. It is not a distant problem.
There are clear steps that must be taken to bring 5G to market that will protect America’s national security, connect rural America, and ensure the U.S. leadership in this industry. The government must provide the leadership and encouragement, while the private sector must install and deploy the necessary, cutting-edge technology. If we fail to implement this all-of-government and all-of society effort to deploy 5G securely and efficiently, we are risking a totalitarian, CCP-controlled technological future. The time to act is now, and the level of urgency cannot be overstated.
Beating China: Currently, the failure of the major American telecommunication companies – and the failure of the U.S. government – leaves us with no competitive position worldwide. We keep warning countries not to use Huawei in the 5G networks, but we don’t have a replacement system to offer. Unfortunately, despite bipartisan efforts in the U.S. to convince our international allies to bar Huawei from 5G networks, we are losing this argument. In January 2020 the United Kingdom announced it would allow Huawei to access some parts of its 5G networks. Similarly, German leaders have paid lip service to the dangers of using Huawei devices in Germany’s network, but the country has so far declined to ban the company from its market. Canadian telecom company Telus Corps announced it would use components for the “backbone” of its 5G network. It is currently impossible to create a wholly American system. This is because we don’t have any companies that can build necessary network components. Instead, U.S. carriers must rely on Samsung, Ericsson, or Nokia to physically build the equipment we need.
As a first step, President Trump should direct the Department of Defense (DoD) to issue a request for proposals for innovative plans to develop a truly nationwide 5G system and respond to Huawei’s expansion. This should be a DoD initiative, because our national security is at stake if the CCP ultimately controls the next-generation Internet. We already know that the CCP uses data collection and control of information to impose its will on its own people. Handing China control of the worldwide database of information that will undergird large-scale artificial intelligence systems is a scary prospect.
Source: Trump and American Future by Newt Gingrich.
COUNTERING THE GROWING STRENGTH OF CHINA:
North Korea: Aside from supplying economic and military aid to its ally, China has another equally important role to play in this Beijing Opera of its own making: to buy time for its North Korean ally to further upgrade its weaponry. Each time North Korea conducts a nuclear test or fires off a missile, Beijing counsels the U.S. that the only way to resolve the tension of the Korean Peninsula is to exercise strategic patience, enter into negotiations, and gradually build trust. Americans should be insulted by these brazen displays of Chinese duplicity. Here we find China lecturing us on the need to “exercise restraint” and “build mutual trust” at the very same time it is quietly helping North Korea, its closest ally, to increase the inventory and accuracy of its missiles. We know the Chinese leadership believes Americans to be naïve and simple in general, but with regard to North Korea, they have been treating us as complete fools. We must make it clear that we hold China directly responsible for the behavior of its closest ally. If China refuses to distance itself from North Korea, then there is only one thing left to do. We must tell China that we will treat an attack by North Korea on the U.S. or its allies as an attack by China. Then we can sit back and count the days until China removes Mad Young Kim from power and shuts down his nuclear and missile programs.
Taiwan: For almost four decades we have engaged in the pretense that – diplomatically speaking – Taiwan doesn’t exist. In order to placate China, we abrogated our mutual security treaty with Taiwan. We established diplomatic relations with the People’s Republic of China in 1979, agreeing to virtually all of Beijing’s demands, including acknowledging that there was only “one China.” (Note: Jimmy Carter was president). While our China policy has failed, our Taiwan policy – if we can even be said to have one – has succeeded. Isolated by the international community, largely abandoned by the U.S., Taiwan has continued to thrive. Against all odds, it has evolved into a modern democratic state, one that shares our values and institutions. As such, it is an island of democratic hope in a sea of Chinese despotism. Upgrading our de facto alliance with Taiwan would strengthen our position in the Asian-Pacific, secure a vital linchpin in our defenses along the Pacific rim, and give hope to China’s dissidents. But it is a functioning, indeed flourishing democracy that poses an existential threat to the continued rule of the Chinese Communist Party.
Source: Bully of Asia by Steven W. Mosher
South China Sea: China is presently defying long-standing international norms by building militarized, artificial islands throughout the South Sea and staking claims on existing features – all in an effort to assert control over the region, weaken the U.S. position, and bully its neighbors into accepting its dominance as a regional hegemon.
Source: Trump vs. China by Newt Gingrich
SUPERPOWER SHOWDOWN: A month after the 2018 midterm elections, chief executives of 75 of the nation’s leading manufacturing technology and financial firms gathered in Washington, D.C. to hear from top Trump administration officials. The CEO’s were concerned about China. The Wall Street Journal’s, editor-at-large, Gerard Baker faced off with John Bolton, who was then the administrations’ national security advisor. Baker posed a question to the audience: “Will the U.S. and China find themselves at war sometime in the next 20 years?” That is, a real war between two nuclear-armed nations that account for 40% of the world’s gross domestic product. In the final vote tally, about one-third of the executives said the two nations were headed for war, an astounding high percentage, considering the audience. How did it come to this moment?
Surely, Donald Trump is part of the answer. As president, he had put half of what China sold to the U.S. under tariffs by the day of the CEO Conference and was threatening levies on the rest of Chinese imports. Various parts of the government were also working on sanctions of Chinese firms for espionage and other misdeeds. No president had taken measures anywhere near this extreme with a major trading partner since the 1930s. But Trump isn’t the entire answer. The trade and economic battle didn’t start with Trump and won’t end with him. Relations were souring before he took office. Chinese leaders also deserve a big share of the blame, as do U.S. business leaders, who for decades acted as Beijing’s lobbyists in Washington.
Has a new Cold War begun? After a year of pressure on Beijing, including levying tariffs on half of everything China sold to the U.S., the American trade team thought it was closing in on a deal in late April 2019 to remake relations, between the world’s two economic superpowers. U.S. tariffs hurt China more than its leader, Xi Jinping, publicly acknowledged. Chinese retaliatory tariffs were hitting their mark too, more than the U.S. leader, Donald Trump would say. The two sides were working on a 150-page agreement covering many American complaints against China: pressure on U.S. companies to transfer technology, weak intellectual property protection, closed financial services markets, currency devaluation that helped Chinese exporters, and insufficient purchases of U.S. goods and services.
But the U.S. side was naively optimistic and made several miscalculations about the power of the U.S. to force China to change. First, U.S. Trade Representative, Robert Lighthizer continued to insist that Washington wouldn’t remove any of its crippling tariffs when Beijing signed the deal, until China demonstrated that it was carrying out its pledges. For Xi Jinping, though, eliminating the tariffs was a bottom-line demand, which he had made clear at the outset of negotiations. On this, he wouldn’t bend. If he couldn’t get the tariffs lifted, a deal wasn’t worth much. Xi decided that Beijing needed to toughen its stance in negotiations.
Trump’s anger at the Chinese actions had another important consequence that Beijing didn’t foresee. For months, the U.S. and China had been at loggerheads over Huawei. The Americans suspected that the telecommunications company was a tool of the Chinese military, which could tap Huawei’s equipment and spy on the company’s customers around the world. To Beijing, Huawei was a crown jewel. If the company was put on the entity list (a group of companies whose U.S. purchases were severely limited) it could strangle the company, or at least halt its advance while it sought to build the technology itself or find other suppliers. Trump like the idea. Xi Jinping looked for ways to strike back. “This was a watershed moment in how China views the trade war,” says a senior Beijing official. “It’s crystal clear that the U.S. motive isn’t just trade. It’s both political and strategic. They want to keep China from becoming stronger.” Through a series of threats, counter threats, and miscalculations, the world’s two biggest economies were edging toward a new Cold War.
A Temporary Truce: Trump tweeted on June 18 that he and the Chinese leaders “had a very good telephone conversation and the two would have an extended meeting” at the G-20 summit scheduled for June 28 & 29 in Japan. Xi Jinping had plenty of reasons to seek a meeting. The trade war had led to some 5 million lost jobs in China’s industrial sector between July 2018 and May 2019. China needed to create 11 million new jobs in 2019 – a target announced by the central government early in the year – to ensure employment for important groups like college graduates, migrant workers, and discharged military personnel. China’s leaders had reasons to worry about a corporate exodus. Beijing faced a conundrum. On the one hand, officials wanted to encourage multinationals to remain in China and expand. On the other hand, they wanted to free China as fast as possible from reliance on foreign technology, even though that would make foreign firms feel unwelcome. Policy makers figured that China’s huge market would ensure enough foreign investment even if they made increasing demands of multinational companies. Xi Jinping focused on self-reliance.
Summary: Up to the Coronavirus Pandemic: After two years of fighting the U.S. and China had finally agreed to a truce in their trade war. The 90-page text of the agreement was released on January 15, 2020. The two sides agreed to this limited deal that paused the trade fight. The agreement contained detailed pledges by Beijing to protect U.S. intellectual property and end pressure on American firms to give up their technology – longtime U.S. goals – though it didn’t compel China to change laws to carry out the pledges. In exchange for small cuts in U.S. tariffs, China promised huge purchases of American products, through many trade experts doubt exports will meet the targets. But the deal left untouched many of America’s deepest concerns about Chinese mercantilism and technology policies. The so-called phase-one-deal is supposed to lead to other phases that will tackle tougher issues. In early 2020, it was far too soon to know how the system would work in practice as the coronavirus raced around the world.
LOOKING AHEAD: COLD WAR II
Despite the January truce, two years of trade wars are dividing the two nations apart. Attitudes of ordinary Americans toward China grew increasingly antagonistic. The percentage of Americans holding an unfavorable view of China jumped to 60% according to a spring 2019 survey by the Pew Research Center. This was the highest level since Pew started asking the question in 2005. This is matched by souring attitudes in China toward Americans.
The president deserves credit for challenging the easy assumptions about China that had guided American policy since at least the Clinton administration. The Trump administration also took seriously the threats to U.S. companies in China – ranging from competition from state-owned firms to the loss of technology through outright theft or more subtle intimidation – and acted sharply to get Beijing to back down. No less than the Western economic and political model is at stake in the competition with China. Americans and Europeans have long assumed that private enterprise coupled with democracy is the most efficient and productive form of development and would inevitably outperform any challenger. Beijing now is challenging that easy assumption, with a state-led model that features bureaucratic direction, heavy censorship, and a flood of cash.
The more powerful China’s economy becomes, the more money it can pour into its military, overseas investments, and technology that can be used for repression. Other countries inevitably look to the number one economy for direction and investment. Props again to the Trump administration for alerting the West to this challenge. That lies between the Trump team’s campaign, so far unsuccessful, to halt Huawei’s ability to dominate 5G telecommunications technology, which will under gird much of the global information network over the coming decade of two.
President Trump has unmasked and brought to the forefront how much China represents an economic, trade, human rights, and national security threat. An external enemy will help unify fractious Americans, as the Cold War against the Soviet Union did. While the Trump administration has been effective at recognizing the Chinese challenge, it’s been woeful at conceiving, planning, and executing a strategy to deal with Beijing’s further rise.
The Chinese government was also putting in place and refining a new system of tracking company behavior, call the corporate social credit system, which deepened state control. Under the program, Chinese government agencies rate companies on about 300 different requirements, including tax compliance, environmental protections, product quality, data transfers, prices, and licenses. Foreign firms fear that the system will be another way Beijing can discriminate against them, while claiming that is simple administering objective criteria.
At the heart of the U.S. – China war is the fear that China will eclipse the U.S. technologically on its way to economic and military superiority. The U.S. leads in nearly every technology named in China’s “Made in China 2020” report. The Trump administration hasn’t coupled its trade war with a domestic program to keep the U.S. ahead.
Source: Superpower Showdown by Bob Davis and Lingling Wei of the Wall Street Journal.
The unabbreviated version of the above can be found in the pdf document below.
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